Economy

I ask myself, "Is this our fate? Is Congress going to allow the dollar to crash, will Congress, through its procrastination, allow the US to lose its greatest advantage -- the reserve status of the US dollar? Could this really happen? A collapse of the dollar is too grotesque to even contemplate. Yet I am definitely considering that such an horrendous set of circumstances could occur.

I've shown chart after chart of the US dollar. I've shown how the Dollar Index has been violating support levels. To refresh your thinking, I've included an up-dated chart of the US Dollar Index (above). What we see here is a giant head-and-shoulders top with a right shoulder that is in the process of breaking down.

“The political process no longer works,” Kevin Zeese, the director of Prosperity Agenda and one of the organizers of the April 15 event, told me. “The economy is controlled by a handful of economic elites. The necessities of most Americans are no longer being met. The only way to change this is to shift the power to a culture of resistance. This will be the first in a series of events we will organize to help give people control of their economic and political life.”

The jury got a flavor of what would happen, he could be put on hold for 30, 45 or 55 minutes, then representatives would give him whatever story they had concocted," she added. Different representatives told Brash different things, many of which were simply not true, Abell alleged. "They would tell him they would investigate and get back to him in 24 hours, he'd call back, and another representative would tell him "there is no investigation being done on your account."

Elena Salgado, the Spanish economy minister, said on Thursday morning that the risk of contagion "is absolutely ruled out... it has been some time since the markets have known that our economy is much more competitive".

Germany's deputy finance minister, Werner Hoyer, also attempted to calm the situation by telling Reuters that there was no risk of a chain reaction spreading across the Iberian peninsula from Lisbon to Madrid. Spain is widely seen as the most likely potential candidate for a bailout now Portugal has bowed to the inevitable by saying it needs help.

Today King World News interviewed Barron’s roundtable member Dr. Marc Faber. When asked to compare the 70‘s cycle to the current one Faber responded, “Well I think we have had in the 70’s rapidly escalating commodity prices, and in some cases they went up much more than what we’ve seen so far in the last ten years. Of course the financial position of the US is much worse than what we had in the 70’s. In the 70’s, total credit as a percent of the economy was just at 140%, we’re now at 379% and we have the unfunded liabilities which we didn’t have at that time. So I would say the financial position of the US has continuously worsened over the last 30 years.”

Energy

"We need to declare a national crisis," Andrew N. Liveris, the chief executive of the Dow Chemical Company, said in recent testimony before the Senate. Dow, the nation's largest chemical maker, has shut 23 plants in the United States in the last three years in places like Somerset, N.J.; South Charleston, W.Va.; and Elizabethtown, Ky., as it shifted production to Kuwait, Argentina, Malaysia and Germany, where natural gas is cheaper.

"Nuclear policy can't ignore public opinion. In the wake of such serious accidents, it's appropriate to suspend revisions [to the framework]," said Yoichi Fujiie, professor emeritus at Tokyo Institute of Technology. Fujiie is a former chairman of the commission.

Environment

In recent days, workers have grappled with several side effects of the emergency measures taken to keep nuclear fuel at the plant from overheating, including leaks of radioactive water at the site and radiation burns to workers who step into the water. The assessment, as well as interviews with officials familiar with it, points to a new panoply of complex challenges that water creates for the safety of workers and the recovery and long-term stability of the reactors.

When Tepco notified Fukushima’s energy department of its new reactor plans, Nozaki immediately told Fukushima’s governor, Yuhei Sato, who reacted with fury. “What is going on?” he fumed. Nozaki met the head of Tepco’s local branch and told him “we definitely cannot accept” the building of new reactors. A Tepco team from Tokyo was given the same “no way” message. The electricity company, said Nozaki, was told by prefectural officials “to sort out problems on the ground first and stop thinking about new reactors.”

Article suggestions for the Daily Digest can be sent to [email protected]. All suggestions are filtered by the Daily Digest team and preference is given to those that are in alignment with the message of the Crash Course and the "3 Es."

"Malloy's negotiating team wants to obtain $1 billion a year for a biennial budget that's in a record deficit. Unions representing 43,000 workers in 31 bargaining units have been asked to consider several savings for the state, including paying more for insurance, making higher payments into their pensions, taking additional furlough days and raising the retirement age.

While Malloy's aides have been meeting regularly with union leaders in an attempt to achieve agreements, there has been little evidence of progress. To gauge interest, some unions have sent members queries covering a variety of potential givebacks.

Roy Occhiogrosso, the governor's top adviser, said Wednesday that while there is no date set for possible layoffs, plans must be put in place. A thousand layoffs are projected to save about $100 million a year, so 10,000 would save the state about $1 billion."

"NEW YORK (CNNMoney) -- House Budget Chairman Paul Ryan's 2012 budget resolution turned the floodlights on Medicare, the health care program for seniors that is projected to take increasingly bigger bites out of the federal budget in the coming decades."

Magnitude 7.4 earthquake hits off Japan coastA smallish tsunami warning. Buildings in Tokyo shook for a minute... I wonder how that might affect efforts at the Fukushima Daiichi reactors... Or recovery efforts near the shoreline "In the days just after the March 11 disaster, searchers gingerly picked through mountains of tangled debris, hoping to find survivors. Heavier machinery has since been called in, but unpredictable tides of radiation from the Fukushima Dai-ichi nuclear complex have slowed progress and often forced authorities to abandon the search, especially within a 12-mile (20-kilometer) evacuation zone around the plant."http://www.boston.com/news/world/asia/articles/2011/04/07/magnitude_74_e...

Japan Rattled by Major Quake; Stocks, Dollar and Oil Fall"U.S. stocks turned sharply lower on news of the 7.4-magnitude aftershock. In foreign exchange, the U.S. dollar extended losses against the Japanese yen. Brent crude oil prices, meanwhile, struck a session low of $121.38 a barrel."http://www.cnbc.com/id/42473145

"The study doesn’t doubt that oil is getting increasingly scarce, as emerging markets such as China ratchet up consumption. "

"The IMF, studying the impact of a 1% drop in oil supply trend growth, says output would be hurt by less than 0.25% in the medium and long term. Prices could rise 200% over 20 years, but as oil exporters see income and wealth rise, they will buy goods from the oil importers like Japan and the United States."

After cutting that last tie to gold, there was no longer any discipline left to keep the value of the dollar steady. The US dollar of August, 1971 is as of 2009 worth just over 18 cents, according to the Inflation Calculator. Thus, in purchasing power, the dollar has lost over 80% in the past 39 years.

Only foreigners were legally able to turn in their US dollars and get gold from the US Government from 1934 to 1971. August 15 of that year closed off that last power of convertibility.

In 1934, gold was confiscated from US citizens, melted from coins into bars, and gathered over the next few years into a new storage facility at Ft Knox, Kentucky. After that, the official price of gold was raised from $20.67 to $35, a devaluation of the currency that was an attempt to inflate the economy out of depression. It didn't work, but what it did do was to attract more gold in one place than had ever been seen.

At a time when deflation was depressing prices for all assets, the drastic rise in the official gold price made people all over the world want to sell their gold to the US Treasury. For many years, $35 an ounce was higher than the market price, so foreign sellers got a bargain.

The peak amount of gold held in Fort Knox reached 701 million ounces of gold. This was in 1949. This amount equaled 69.9% of all the gold in the world; never before had so much gold been gathered in one place.

But soon after that, gold began to leave Ft Knox and was shipped to the foreign persons and institutions who ponied up their $35 in Federal Reserve Notes for each troy ounce of gold they wanted. At some point in the 1950s, $35 became too cheap a price for gold.

From then until 1972, at least 75% of official US gold left the nation in exchange for paper dollars which can be printed at will. However, I think the total amount of real gold which remains is even less. The exact amount that remains is now officially listed at 147.3 million ounces. From the peak, that is a decline of 79%.

In 1988, 22 years ago, I wrote a book about Fort Knox, the gold there, and the documented history of official lies, evasions and incompetence of those who were entrusted with the gold.

I say "documented history" because when writing the book, I was very careful to only include official documents and private correspondence from the US government, stretching from 1934 to 1987. Using their own responses to the questions of just how much gold is left, and what that gold's quality is, for the first time this book put all these governmental attempts to answer the questions about their own gold policies in one place. What their responses revealed was shocking to me.

You can see that all the trade in the world proceeded in an orderly fashion, under Bretton Woods, established in 1944 as the basis for the post-World War II monetary system, up to 1971.

Under Bretton Woods, gold, and in lieu of gold, dollars, were deemed to be the means of “Settlement” of trade imbalances. The system worked well, although the seed of its final destruction had been sown, in the form of “in lieu of gold, dollars”.

If your like me I know you struggle with understanding hyperinflation and deflation and then there is the constant battle of predictions on what will happen. Who is correct??? Well this little piece might help...

The initiating spark of hyperinflation (currency collapse) is the loss of confidence in a currency. This drives the fear of loss of purchasing power which drives people to quickly exchange currency for any economic good they can get their hands on. This drives the prices of economic goods up and empties store shelves, which causes more panic and fear in a vicious feedback loop.

The printing of wheelbarrows full of cash is the government's response to price hyperinflation (currency collapse), not its cause. This uncontrollable (knee-jerk) government response happens in some cases, but not all. Let me repeat: The massive printing that first comes to mind when anyone mentions hyperinflation is not the cause, it is an effect, in the common understanding of hyperinflation which is the collapse of a currency.

"The study doesn’t doubt that oil is getting increasingly scarce, as emerging markets such as China ratchet up consumption. "

"The IMF, studying the impact of a 1% drop in oil supply trend growth, says output would be hurt by less than 0.25% in the medium and long term. Prices could rise 200% over 20 years, but as oil exporters see income and wealth rise, they will buy goods from the oil importers like Japan and the United States."

The benevolent IMF........

So, other than all that other stuff, how did you enjoy the play Mrs. Lincoln?

As Federal Reserve chair Ben Bernanke considers the timing of when to rein in monetary stimulus, some investors said the central bank chief should look back at the great inflationary period in the United States and the United Kingdom during the 1970s.

CNBC.com

From 1965 to 1980 when the change in consumer prices year-over-year reached as much as 15 percent in the U.S. and more than 25 percent annually in Great Britain, none of the major asset classes – stocks, bonds, commodities – could exceed the returns of cash, according to a report by Nomura.

Investing $100 in cash (defined as the Federal Funds Rate minus inflation) at the start of that hyperinflationary period preserved that $100 in real terms (above inflation) when the 15-year period marked by oil shocks and war finally ended, Nomura’s analysis found. Cumulative real returns in the S&P 500 and U.S. Treasuries were negative.

For all the confident market timers out there, commodities showed enormous pops at times during this period, especially after the end of the dollar’s peg to gold in 1971 when the value of the CRB commodities index more than doubled. Over time though, even commodities came back to earth, managing to only keep pace with cash during that period, Nomura found. And since then, commodities have trailed inflation.

trade is circular in nature,” said Brian Kelly, founder of Kanudrum Capital. “The rise in gold is a signal to the market that inflation will continue, which then signals investors to buy more gold, thus it becomes the ultimate bubble.”

Investors like to say a little bit of inflation is good for stocks. And it has been. The S&P 500

But now Bernanke is entering make or break territory. The ECB raised rates Thursday, following in the footsteps of China and India. Several Federal Reserve members over the last two weeks have hinted that it may be time to pump the breaks. Yet, the Fed under Bernanke’s direction is still in the middle of its $600 billion buying program of Treasury securities (effectively keeping rates negative) that ends in July.

The problem, points out Nomura, is that once inflation gets going in a certain direction, it keeps going for long periods of time.

“Inflation is not a random walk,” wrote Anthony Morris and Swati Aggarwal, in the note Thursday. “Inflation in the long run displays clear cycles.”

From 1980 until the deflationary period during the height of the credit crisis, inflation had generally gone down. On a shorter-term basis, Nomura found statistically that the previous month’s CPI reading tended to predict the change in prices next month.

February’s CPI annual reading came in at 2.1 percent and its expected to be higher when March’s price figures are released next week. For Bernanke’s sake, let’s hope this is not a trend.

Akira Kurosawa, arguably Japan's greatest film director, released a film called "Dreams" in 1990. The film is a depiction, in eight short vignettes, of Kurosawa's actual dreams. One of the segments is called "Mt Fuji in Red," and portrays the explosion of six nuclear reactors in Japan.

Plat91965 said: "Akira Kurosawa, arguably Japan's greatest film director, released a film called "Dreams" in 1990. The film is a depiction, in eight short vignettes, of Kurosawa's actual dreams. One of the segments is called "Mt Fuji in Red," and portrays the explosion of six nuclear reactors in Japan. http://www.youtube.com/watch?v=mTg3D1PoyUE"

I watched the film.

Wow.

Heartbreaking, eerily prophetic, it is a reminder of who is suffering most with this event.Thank you.

I am wildly bullish on energy as an inflation hedge and increasingly prized asset. I own a lot of energy and resource funds (15%; vide supra). They look good if inflation rages on. They look even better if the global economy recovers, and the new normal is just like the old normal. I am particularly excited about natural gas-based equities. The logic is simple: there are gobs of natural gas, it is dirt cheap, and the equities act like dead money. I guess that needs a little explanation. You could learn a lot watching my dog catch squirrels. She quickly learned that you don't run at the squirrel; you run straight to the tree. The Wall Street guys won't invest unless they can make money today. They chase squirrels. As oil gets harder to get, eventually natural gas will start looking very attractive. To beat Wall Street, all you have to do is run to the tree. Natural-gas-based investments are cheap right now, but they may be an un-fracking-believable opportunity in the future.